Is War Good For the Economy?

In short: No.

by Justin Raimondo

Editor's note: The following originally ran June 25, 2008.

The idea
that warfare
helps the economy is a prime example of Bizarro logic, which has pervaded
our collective consciousness since the 9/11 terrorist attacks, ideological
fallout from the explosion of national hysteria that followed. In Bizarro
World, as we all
know, the laws of nature
and logic
are inverted, so that up is down, freedom
is slavery, and ignorance
is strength. In the post-9/11 era, as I have often pointed out, we have
finally arrived in a world where two plus two can and indeed often
does equal five – if it suits the purposes of the War Party to deem it
so.

Somewhere, George
Orwell isn't smiling. He'd no doubt be appalled, and a little nonplused,
by the accuracy of his speculations in Nineteen
Eighty-Four. In the novel, you'll recall, the deliberate impoverishment
of the ordinary "proles" and the Outer Party types was a matter of
INGSOC policy, a theme underscored by
the general shabbiness of Orwell's dystopia, what with the constant shortages
and the way thing always seemed to be literally and physically falling apart.
Particularly striking is the Orwellian presentiment that the world of the future
is bound to be poorer and, simultaneously, engaged in constant
warfare.

This prediction seemed, for quite a
while, to be one of the few he got wrong. Yet Orwell, it turns out, was right;
it's just that the productive power of capitalism in the U.S. was so great that
it coasted along for a long time on sheer momentum. Our accumulated wealth reflected
the dynamism of an earlier era. This upward spiral of productivity and wealth-generation
really crested during the 1950s, a period of unprecedented prosperity and cultural
optimism, and the early 1960s – before the Vietnam war and the inflationary
policies that financed it ate away at the heart of American prosperity,
the necessary prelude to the "stagflation"
of the Carter years.

This hasn't always been immediately obvious. The false prosperity induced by
the speeding up of the printing presses over at the Federal Reserve led to what
Alan Greenspan once called "irrational
exuberance," a delusion created by the very easy money policies he
carried out as head of the Fed. No sooner had certain Beltway
sages declared that the age of permanent abundance was upon us – and that
this rendered the struggle against the Welfare-Warfare
State irrelevant – than their economic cornucopia of limitless wealth went
empty. As banks are bailed out while ordinary Americans are turned out into
the streets, the manic hubris of Fukuyama's
historical "endism" and prophecies of universal prosperity via "globalization"
stand revealed in all their silliness.

Mania is invariably followed by a massive downward plunge into despair, in
economic terms, a deep recession,
if not something far worse. So what has stopped the forward motion of America's
dash over history's finish line?

As Ron Paul has tirelessly
explained, it is the cost of our expanding overseas empire that is driving us
into bankruptcy. We have, as the Old Right seer Garet Garrett put
it, an empire of a unique type, one in which "everything goes out and
nothing comes in." The costs of this are ordinarily hidden from sight,
as Ron Paul explains,
by governmental sleight-of-hand:

"As the war in Iraq surges forward, and the administration ponders
military action against Iran, it's important to ask ourselves an overlooked
question: Can we really afford it? If every American taxpayer had to submit
an extra five or ten thousand dollars to the IRS this April to pay for the
war, I'm quite certain it would end very quickly. The problem is that government
finances war by borrowing and printing money, rather than presenting a bill
directly in the form of higher taxes. When the costs are obscured, the question
of whether any war is worth it becomes distorted."

Yet there comes a time when the obscuring mists are cleared and the costs of
our foreign policy of perpetual war become readily apparent, and surely that
time is approaching. Indeed, it may have already passed. Garrett dubbed ours'
"the empire of the Bottomless Purse," yet we are just about scratching
bottom about now. It remains
for Paul and the movement he generated
to point out how all of this is paid for. As Paul puts it:

"Congress and the Federal Reserve Bank have a cozy, unspoken arrangement
that makes war easier to finance. Congress has an insatiable appetite for new
spending, but raising taxes is politically unpopular. The Federal Reserve,
however, is happy to accommodate deficit spending by creating new money through
the Treasury Department. In exchange, Congress leaves the Fed alone to operate
free of pesky oversight and free of political scrutiny. Monetary policy is
utterly ignored in Washington, even though the Federal Reserve system is a
creation of Congress.

"The result of this arrangement is inflation. And inflation finances
war."

When our rulers decide
to go to war, they simply step on the
gas and flood the engines of inflated expectations, fueled by bank credit
expansion. The results are the decline
of the dollar and the current economic crisis, which might be compared to a
hangover that follows an extended binge. Americans are suffering a double-hangover
in the sense that they're still recovering from the post-Cold War triumphalism
that envisioned a unipolar, Washington-centered world.

The idea that the defense of the country requires an overseas empire that surpasses
the British imperium at its zenith is a typical neocon fantasy, one that is
proving far more costly than advertised. Yet some are raking it in while others
are foreclosed. Remember
how the sale of oil was supposed to pay for the Iraq war? A consortium of U.S.
and European oil companies have since homesteaded
the oil revenues Paul Wolfowitz assured
us would be reimbursed to the American taxpayers. It's funny how that works.

War, as the liberal intellectual Randolph
Bourne famously explained, is
the health of the state. That is, it benefits state officials and their
dependents, clients, and assorted sycophants at the expense
of the rest of us. Many are impoverished by our policies, but a
few are enriched. The beneficiaries are the growing administrative,
corporate, and military
bureaucracies that oversee our ever expanding global
presence, in effect a colonial class. This class pursues and secures its
economic and social interests by means of directly
influencing government policy, operating as an organized force on behalf of
the policy of imperialism, so far with remarkable success.

When John McCain sneered at Mitt Romney's
business experience as lacking in honor and the spirit of self-sacrifice, he
was expressing the "noble" and highly stagy sentiments of this rising
class. Forget the free market fervor of the Reagan era, when entrepreneurs were
valorized. The new Republican hero is the swaggering caesar.

Is the Iraq war good for the economy?

Well, whose economy? Who benefits from this war, and who loses? Once
the American people realize that they're among this war's biggest losers – aside
from the Iraqi people, and perhaps the Iranians, too – they'll turn on the
beneficiaries with a vengeance. As their savings are eaten up by inflation,
and the equity they labored to preserve and increase evaporates into thin air,
ordinary Americans are likely to be quite interested in the question: who's
responsible?

As the Federal Reserve pumps more
funny money into circulation, in a desperate and vain attempt to postpone
the crisis of the Warfare State, the single biggest winners are the banks, the
most government-protected industry of all, who are the first to be bailed
out of any crisis. Oh, perhaps a few will be allowed to go under, but the
big ones will be too big to fall, like Bear
Stearns. The economic elite will golden parachute its way out of the crisis.

The main beneficiaries of the present system – what Murray Rothbard, the late
libertarian theorist and polemicist, called the Welfare-Warfare
State – are the new plutocrats. Think of what Ayn Rand referred to as "the
aristocracy of pull," the principal villains of her famous novel Atlas
Shrugged, i.e., corrupt businessmen who succeeded on account of their political
connections rather than their entrepreneurial skill.

Today's aristocracy of pull is the militarized sector of the economy, which
is completely dependent on government contracts. Their political Praetorian
Guard is represented in Washington by both parties, and, what's more, their
partisans dominate think-tanks of the ostensible Left as well as the Right.

The task of those who oppose the new colonialism, which masquerades as global
altruism of one sort or another, is to unmask the real motives and connections
of a self-interested colonial class, which, in spite of its claim to the mantle
of honor and duty to country, is supremely successful at promoting its own
interests over and above those of the nation.